Here in the US, we frequently hear from politicians the need to decrease our dependence on foreign imports. This topic is typically limited to fossil fuels and is argued in order to open and support more mining sectors. Our estate consultant recently read that India also voiced a need to reduce reliance on foreign imports but for a different commercial sector.
Some estimates show that India is one of the top consumers of gold and the demand continues to rise each year and is expected to rise up to 1,000 tons this year alone. This demand increase also comes at a time when the Indian rupee is falling and a 10% tax on imported gold. The Indian government is hoping to alleviate some of that money spent on taxation and moving the “trapped wealth” currently residing in homes, businesses, and temples to banks.
Earlier this month this estate consultant read that the Indian government released a document explaining an initiative to decrease the country’s reliance on imported gold. They have taken a creative approach by attempting to utilize the approximate 20,000 metric tons of gold sitting unused in residences. Most of these are expected to be small trinkets, broken jewelry, and scrap pieces.
Their method of acquiring gold from their residents? A simple gold deposit to banks in exchange for a savings account. Once the gold is brought in and assessed in a consultation, it is melted down to confirm the value and deposited into a savings account for the customer. From there, interest that will build over time in that account, and withdrawals can be made in as little as 60 days. It is something our estate consultant sees as a creative approach to the usual “cash for gold” advertisements we see.
Our estate consultant also read that once the gold is acquired by participating banks, it would go towards one of three possible routes: transferred to gold refineries, used in currency, or lent to jewelers.
PARTING WITH GOLD
Despite the allure of gaining wealth, there is still the possibility that people may not take the bait. In a culture where gold is routinely purchased and gifted as part of wedding dowries and other family gifts or kept as wealth security at home during financial instability, some analysts worry that people may be reluctant to part with gold they have at home. Even broken jewelry and scrap pieces may be difficult to part with given the cultural significance gold has with Indian culture.
However, if locals are eventually able to part ways with their gold, Indian analysts estimate that the country can see a significant increase in gold deposits. For example, if just 2% of India’s population were to bite on this program, the country would gain approximately 750 metric tons, which is close to the suggested estimates of increased demand for the precious metal.
This is something that our estate consultant sees as not only beneficial for the Indian economy but also a model other countries could follow in the future.